#THE NEGOTIABLE INSTRUMENTS ACT, 1881 
_____________ 

##ARRENGMENT OF SECTIONS 
____________ 

###CHAPTER I 

###PRELIMINARY 

SECTIONS 

1. Short title. 
   Local extent, 
   Saving of usages relating to hundis, etc., 
   Commencement. 
2. [Repealed.]. 
3. Interpretation-clause. 
    Banker. 

###CHAPTER II 

###OF NOTES, BILLSAND CHEQUES 

4. “Promissory note”. 
5. “Bill of exchange”. 
6. “Cheque”. 
7.  “Drawer”, “Drawee”. 
  “Drawee in case of need”. 
  “Acceptor”. 
  “Acceptor for honour”. 
  “Payee”. 
8. “Holder”. 
9. “Holder in due course”. 
10. “Payment in due course”. 
11. Inland instrument. 
12. Foreign instrument. 
13. “Negotiable instrument”. 
14. Negotiation. 
15. Indorsement. 
16. Indorsement “in blank” and “in full”. 
    “Indorsee”. 
17. Ambiguous instruments. 
18. Where amount is stated differently in figures and words. 
19. Instruments payable on demand. 
20. Inchoate stamped instruments. 
21. “At sight” —“On presentment”. 
  “After sight”. 
22. “Maturity”. 
  Days of grace. 
23. Calculating maturity of bill or note payable so many months after date or sight. 
24. Calculating maturity of bill or note payable so many days after date or sight. 
25. When day of maturity is a holiday. 

###CHAPTER III 

###PARTIES TO NOTES, BILLS AND CHEQUES. 

26. Capacity to make, etc., promissory notes, etc. 
  Minor. 
27. Agency. 
28. Liability of agent signing. 
29. Liability of legal representative signing. 
30. Liability of drawer. 
31. Liability of drawee of cheque. 
32. Liability of maker of note and acceptor of bill. 
33. Only drawee can be acceptor except in need or for honour. 
34. Acceptance by several drawees not partners.
35. Liability of indorser. 
36. Liability of prior parties to holder in due course. 
37. Maker, drawer and acceptor principals. 
38. Prior party a principal in respect of each subsequent party. 
39. Surety ship. 
40. Discharge of indorser’s liability. 
41. Acceptor bound, although indorsement forged. 
42. Acceptance of bill drawn in fictitious name. 
43. Negotiable instrument made, etc., without consideration. 
44. Partial absence or failure of money-consideration. 
45. Partial failure of consideration not consisting of money. 
45A. Holder’s right to duplicate of lost bill. 

###CHAPTER IV 

###OF NEGOTIATION 

46. Delivery. 
47. Negotiation by delivery. 
48. Negotiation by indorsement. 
49. Conversion of indorsement in blank into indorsement in full. 
50. Effect of indorsement. 
51. Who may negotiate. 
52. Indorser who excludes his own liability or makes it conditional. 
53. Holder deriving title from holder in due course. 
54. Instrument indorsed in blank. 
55. Conversion of indorsement in blank into indorsement in full. 
56. Indorsement for part of sum due. 
57. Legal representative cannot by delivery only negotiate instrument indorsed by deceased. 
58. Instrument obtained by unlawful means or for unlawful consideration. 
59. Instrument acquired after dishonour or when overdue. 
  Accommodation note or bill. 
60. Instrument negotiable till payment or satisfaction. 

###CHAPTER V 

###OF PRESENTMENT 

61. Presentment for acceptance. 
62. Presentment of promissory note for sight. 
63. Drawee’s time for deliberation. 
64. Presentment for payment. 
65. Hours for presentment. 
66. Presentment for payment of instrument payable after date or sight. 
67. Presentment for payment of promissory note payable by instalments. 
68. Presentment for payment of instrument payable at specified place and not elsewhere. 
69. Instrument payable at specified place. 
70. Presentment where no exclusive place specified. 
71. Presentment when maker, etc., has no known place of business or residence. 
72. Presentment of cheque to charge drawer. 
73. Presentment of cheque to charge any other person. 
74. Presentment of instrument payable on demand. 
75. Presentment by or to agent, representative of deceased, or assignee of insolvent. 
75A. Excuse for delay in presentment for acceptance or payment. 
76. When presentment unnecessary. 
77. Liability of banker for negligently dealing with bill presented for payment. 

###CHAPTER VI 

###OF PAYMENTAND INTEREST 

78. To whom payment should be made. 
79. Interest when rate specified. 
80. Interest when no rate specified. 
81. Delivery of instrument on payment or indemnity in case of loss. 

###CHAPTER VII 

###OF DISCHARGE FROM LIABILITY ON NOTES,BILLS AND CHEQUES 

82. Discharge from liability. 
  (a) by cancellation; 
  (b) by release; 
  (c) by payment. 
83. Discharge by allowing drawee more than forty-eight hours to accept. 
84. When cheque not duly presented and drawer damaged thereby. 
85. Cheque payable to order. 
85A. Drafts drawn by one branch of a bank on another payable to order. 
86. Parties not consenting discharged by qualified or limited acceptance. 
87. Effect of material alteration. 
  Alteration by indorsee. 
88. Acceptor or indorser bound notwithstanding previous alteration. 
89. Payment of instrument on which alteration is not apparent. 
90. Extinguishment of rights of action on bill in acceptors’ hands. 

###CHAPTER VIII 

###OF NOTICE OF DISHONOUR 

91. Dishonour by non-acceptance. 
92. Dishonour by non-payment. 
93. By and to whom notice should be given. 
94. Mode in which notice may be given. 
95. Party receiving must transmit notice of dishonour. 
96. Agent for presentment. 
97. When party to whom notice given is dead. 
98. When notice of dishonour is unnecessary. 

###CHAPTER IX 

###OF NOTING AND PROTEST 

99. Noting. 
100. Protest. 
     Protest for better security. 
101. Contents of protest. 
102. Notice of protest. 
103. Protest for non-payment after dishonour by non-acceptance. 
104. Protest of foreign bills. 
104A.When noting equivalent to protest. 

###CHAPTER X 

###OF REASONABLE TIME 

105. Reasonable time. 
106. Reasonable time of giving notice of dishonour. 
107. Reasonable time for transmitting such notice. 

###CHAPTER XI 

###OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED 

108. Acceptance for honour. 
109. How acceptance for honour must be made. 
110. Acceptance not specifying for whose honour it is made. 
111. Liability of acceptor for honour. 
112. When acceptor for honour may be charged. 
113. Payment for honour. 
114. Right of payer for honour. 
115. Drawee in case of need. 
116. Acceptance and payment without protest. 

###CHAPTER XII 

###OF COMPENSATION 

117. Rules as to compensation. 

###CHAPTER XIII 

###SPECIAL RULES OF EVIDENCE 

118. Presumptions as to negotiable instruments. 
  (a) of consideration; 
  (b) as to date; 
  (c) as to time of acceptance; 
  (d) as to time of transfer; 
  (e) as to order of indorsements; 
  (f) as to stamp; 
  (g) that holder is a holder in due course; 
119. Presumption on proof of protest. 
120. Estoppel against denying original validity of instrument. 
121. Estoppel against denying capacity of payee to indorse. 
122. Estoppel against denying signature or capacity of prior party. 

###CHAPTER XIV 

###OF CROSSED CHEQUES 

123. Cheque crossed generally. 
124. Cheque crossed specially. 
125. Crossing after issue. 
126. Payment of cheque crossed generally. 
  Payment of cheque crossed specially. 
127. Payment of cheque crossed specially more than once. 
128. Payment in due course of crossed cheque. 
129. Payment of crossed cheque out of due course. 
130. Cheque bearing “not negotiable”. 
131. Non-liability of banker receiving payment of cheque. 
131A. Application of Chapter to drafts. 

###CHAPTER XV 

###OF BILLS IN SETS

132. Set of bills. 
133. Holder of first acquired part entitled to. 

###CHAPTER XVI 

###OF INTERNATIONAL LAW 

134. Law governing liability of maker, acceptor or indorser of foreign instrument. 
135. Law of place of payment governs dishonour. 
136. Instrument made, etc., out of India, but in accordance with the law of India. 
137. Presumption as to foreign law. 

###CHAPTER XVII 

###OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS 

138. Dishonour of cheque for insufficiency, etc., of funds in the account. 
139. Presumption in favour of holder. 
140. Defence which may not be allowed in any prosecution under section 138. 
141. Offences by companies. 
142. Cognizance of offences. 
142A. Validation for transfer of pending cases. 
143. Power of Court to try cases summarily. 
143A. Power to direct interim compensation. 
144. Mode of service of summons. 
145. Evidence on affidavit. 
146. Bank’s *slip prima facie* evidence of certain facts. 
147. Offences to be compoundable. 
148. Power of Appellate Court to order payment pending appeal against conviction. 
SCHEDULE.—*[Enactments repealed]*.



#THE NEGOTIABLE INSTRUMENTS ACT, 1881 

##ACT NO. 26 OF 1881

[9th December, 1881.] 

An Act to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. 

**Preamble.**—Whereas it is expedient to define and amend the law relating to promissory notes, bills 
of exchange and cheques; It is hereby enacted as follows:— 

###CHAPTER I 

###PRELIMINARY 

1. **Short title.**—This Act  may be called the Negotiable Instruments Act, 1881. 

**Local extent. Saving of usages relating to hundis, etc.**—It extends to the whole of India but 
nothing herein contained affects the [^1]Indian Paper Currency Act, 1871 (3 of 1871), section 21, or affects 
any local usage relating to any instrument in an oriental language: 

  Provided  that  such  usages  may  be  excluded  by  any  words  in  the  body  of  the  instrument  which 
indicate an intention that the legal relations of the parties thereto shall he governed by this Act; 

**Commencement.**—and it shall come into force on the first day of March, 1882. 

2. **[Repeal of enactments.]** *Rep. by the Repealing and Amending Act,* 1891(12 of 1891), s. 2 *and 
the Schedule I.*

3. **Interpretation-clause.**—In this Act— 

**“Banker”**.— “banker” includes any person acting as a banker and any post office savings bank;

###CHAPTER II 

###OF NOTES, BILLS AND CHEQUES 

4. **“Promissory note.”**—A “Promissory note” is an instrument in writing (not being a bank-note or a 
currency-note)  containing  an  unconditional  undertaking,  signed  by  the  maker,  to  pay  a  certain  sum  of 
money only to, or to the order of, a certain person, or to the bearer of the instrument. 

*Illustrations*

A Signs instruments in the following terms: 

  (a) “I promise to pay B or order Rs. 500.” 

  (b) “I acknowledge myself to be indebted to B in Rs. 1,000, to be paid on demand, for value received.” 

  (c) “Mr. B, I O U Rs. 1,000.” 

  (d) “I promise to Pay B Rs. 500 and all other sums which shall be due to him.” 

  (e) “I promise to Pay B Rs. 500, first deducting thereout any money which he may owe me.” 

  (f) “I promise to Pay B Rs. 500 seven days after my marriage with C.” 

  (g) “I, promise to Pay B Rs. 500 on D's death, provided D leaves me enough to pay that sum.” 

[^1]. Rep. by the Indian Paper Currency Act, 1923 (10 of 1923). See now the Reserve Bank of India Act, 1934 (2 of 1934), s. 31. 

 
 
  (h) “I promise to Pay B Rs. 500 and to deliver to him my black horse on 1st January next.” 

  The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), 
(d), (e), (f), (g) and (h)are not promissory notes. 

5. **“Bill of exchange”.**—A “bill of exchange” is an instrument in writing containing an unconditional 
order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the 
order of, a certain person or to the bearer of the instrument. 

  A promise or order to pay is not “conditional”, within the meaning of this section and section 4, by 
reason of the time for payment of the amount or any instalment thereof being expressed to be on the lapse 
of a certain period after the occurrence of a specified even which, according to the ordinary expectation of 
mankind, is certain to happen, although the time of its happening may be uncertain. 

  The  sum  payble  may  be  “certain”,  within  the  meaning  of  this  section  and  section  4,  although  it 
includes  future  interest  or  is  payable  at  an  indicated  rate  of  exchange,  or  is  according  to  the  course  of 
exchange, and although the instrument provides that, on default of payment of an instalment, the balance 
unpaid shall become due. 

  The  person  to  whom  it  is clear  that  the  direction  is given  or  that  payment  is  to  be  made  may  be  a 
“certain  person”,  within  the  meaning  of  this  section  and  section  4,  although  he  is  mis-named  or 
designated by description only. 

6. **“Cheque”.**—A “cheque” is a bill of exchange drawn on a specified banker and not expressed to 
be  payable  otherwise than on  demand  and  it includes  the  electronic  image  of  a truncated cheque  and  a 
cheque in the electronic form. 

*Explanation* I.—For the purposes of this section, the expressions— 

  (a) “a  cheque in  the  electronic  form”  means  a  cheque  drawn in  electronic  form  by  using  any 
computer resource and signed in a secure system with digital signature (with or without biometrics 
signature) and asymmetric crypto system or with electronic signature, as the case may be;

  (b) “a truncated cheque”  means a  cheque  which is truncated during the course  of  a clearing cycle, 
either  by  the  clearing  house  or  by  the  bank  whether  paying  or  receiving  payment,  immediately  on 
generation  of  an  electronic  image  for  transmission,  substituting  the  further  physical  movement  of  the 
cheque in writing. 

*Explanation* II.— For the purposes of this section, the expression “clearing house” means the clearing 
house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank 
of India.

*Explanation*  III.—For  the  purposes  of  this  section,  the  expressions  “asymmetric  crypto  system”, 
“computer resource”, “digital signature”, “electronic form” and “electronic signature” shall have the same 
meanings respectively assigned to them in the Information Technology Act, 2000(21 of 2000).

7. **“Drawer” “Drawee”.**—The  maker  of  a  bill  of  exchange  or  cheque  is  called  the  “drawer”;  the 
person thereby directed to pay is called the “drawee”. 

**“Drawee in case of need”.**— When in the Bill or in any indorsement thereon the name of any person 
is given in addition to the drawee to be resorted to in case of need such person is called a “drawee in case 
of need.” 

**“Acceptor”.**—After the drawee of a bill has signed his assent upon the bill, or, if there are more parts 
thereof than one, upon one of such parts, and delivered the same, or given notice of such signing to the 
holder or to some person on his behalf, he is called the “acceptor”. 

**“Acceptor for honour”.**— When a bill of exchange has been noted or protested for non-acceptance 
acceptance or for better security, and any person accepts it supra protest for honour of the drawer or of 
any one of the indorsers, such person is called an “acceptor for honour”. 

**“Payee”.**—The  person  named  in  the  instrument,  to  whom  or  to  whose  order  the  money  is  by  the 
instrument directed to be paid, is called the “Payee”. 

8. **“Holder”.**—The  “holder”  of  a  promissory  note,  bill  of  exchange  or  cheque  means  any  person 
entitled in his own name to the possession thereof and to receive or recover the amount due thereon from 
the parties thereto. 

  Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of 
such loss or destruction. 

9. **“Holder in due course”.**—“Holder  in  due  course”  means  any  person  who  for  consideration 
became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, 

  or the payee or indorsee thereof, if payable to order,

  before the amount mentioned in it became payable, and without having sufficient cause to believe that 
any defect existed in the title of the person from whom he derived his title. 

10. **“Payment  in  due  course”.**—“Payment  in  due  course”  means  payment  in  accordance  with  the 
apparent tenor of the instrument in good faith and without negligence to any person in possession thereof 
under  circumstances  which  do  not  afford  a  reasonable  ground  for  believing  that  he  is  not  entitled  to 
receive payment of the amount therein mentioned. 

11. **Inland instrument.**—A promissory note, bill of exchange or cheque drawn or made in India 
and  made  payable  in,  or  drawn  upon  any  person  resident  in, India shall  be  deemed  to  be  an  inland 
instrument. 

12. **Foreign instrument.** —Any  such  instrument  not  so  drawn,  made  or  made  payable  shall  be 
deemed to be a foreign instrument. 

13. **“Negotiable  instrument”.**— (1) A “negotiable instrument” means a promissory note, bill of 
exchange or cheque payable either to order or to bearer. 

*Explanation* (i)—A  promissory  note,  bill  of  exchange  or  cheque  is  payable  to  order  which  is 
expressed  to  be  so  payable  or  which  is  expressed  to  be  payable  to  a  particular  person,  and  does  not 
contain words prohibiting transfer or indicating an intention that it shall not be transferable. 

*Explanation* (ii)—A  promissory  note,  bill  of  exchange  or  cheque  is  payble  to  bearer  which  is 
expressed to be so payable or on which the only or last indorsement is an indorsement in blank. 

*Explanation* (iii)—Where  a  promissory  note,  bill  of  exchange  or  cheque,  either  originally  or  by 
indorsement,  is  expressed  to  be  payable  to  the  order  of  a  specified  person,  and  not  to  him  or  his 
order, it is nevertheless payable to him or his order at his option.

(2) A negotiable instrument may be made payable to two or more payees jointly, or it may be made 
payable in the alternative to one of two, or one or some of serveral payees.

14. **Negotiation.**—When a promissory note, bill of exchange or cheque is transferred to any person, 
so as to constitute that person the holder thereof, the instrument is said to be negotiated. 

15. **Indorsement.**—When the maker or holder of a negotiable instrument signs the same, otherwise 
than  as  such  maker,  for  the  purpose  of  negotiation,  on  the  back  or  face  thereof  or  on  a  slip  of  paper 
annexed  thereto,  or  so  signs  for  the  same  purpose  a  stamped  paper  intended  to  be  completed  as  a 
negotiable instrument, he is said to indorse the same, and is called the “indorser”. 

16. **Indorsement “in blank” and “in full”.**— (1) If  the  indorser  signs  his  name  only,  the 
indorsement  is  said  to  be  “in  blank,”  and  if  he  adds  a  direction  to  pay  the  amount  mentioned  in  the 
instrument  to,  or  to  the  order  of,  a  specified  person,  the  indorsement  is  said  to  be  “in  full”,  and  the 
person so specified 

**“Indorsee”.**—is called the “indorsee” of the instrument. 

(2) The provisions of this Act relating to a payee shall apply with the necessary modifications to an 
indorsee.

17. **Ambiguous instruments.**—Where an instrument may be construed either as a promissory note or 
bill of exchange, the holder may at his election treat it as either, and the instrument shall be thenceforward 
treated accordingly. 

18. **Where  amount  is  stated  differently  in  figures  and  words.**—If the  amount  undertaken  or 
ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the 
amount undertaken or ordered to be paid. 

19. **Instruments payable on demand.**—A promissory note or bill of exchange, in which no time for 
payment is specified, and a cheque, are payable on demand. 

20. **Inchoate stamped instruments.**—Where  one  person  signs  and  delivers  to  another  a  paper 
stamped  in  accordance  with  the  law  relating  to  negotiable  instruments  then  in  force  in India, and 
either  wholly  blank  or  having  written  thereon  an  incomplete  negotiable  instrument,  he  thereby  gives 
*prima  facie*  authority  to  the  holder  thereof  to  make  or  complete,  as  the  case  may  be,  upon  it  a 
negotiable instrument, for any amount specified  therein and not exceeding the amount covered by the 
stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed 
the same, to any holder in due course for such amount: provided that no person other than a holder in 
due  course  shall  recover  from  the  person  delivering  the  instrument  anything  in  excess  of  the  amount 
intended by him to be paid thereunder. 

21. **“At  sight”.—“On  presentment”.**—Ina promissory note or bill of exchange the expressions “at 
sight” and “on presentment” mean on demand. The expression **“After sight”**—“after sight” means, in a 
promissory note, after presentment for sight, and, in a bill of exchange, after acceptance, or nothing for 
non-acceptance, or protest for non-acceptance. 

22. **“Maturity”.**—The maturity of a promissory note or bill of exchange is the date at which it falls 
due. 

**Days of grace.**—Every promissory note or bill of exchange which is not expressed to be payable on 
demand, at sight or on presentment is at maturity on the third day after the day on which it is expressed to 
be payable. 

23. **Calculating  maturity  of  bill  or  note  payable  so  many  months  after  date  or  sight.**—In 
calculating  the  date  at  which  a  promissary  note  or  bill  of  exchange,  made  payable  a  stated  number  of 
months after date or after sight, or after a certain event, is at maturity, the period stated shall be held to 
terminate  on the day  of the  month  which corresponds with the day  on  which the instrument is  dated, or 
presented  for  acceptance  or  sight,  or  noted  for  non-acceptance,  or  protested  for  non-acceptance,  or  the 
event happens, or, where the instrument is a bill of exchange made payable a stated number of months after 
sight and has been accepted for honour, with the day on which it was so accepted. If the month in which 
the period would terminate has no corresponding day, the period shall be held to terminate on the last 
day of such month. 

*Illustrations*

  (a) A  negotiable  instrument,  dated  29th  January,  1878,  it  made  payable  at  one  month  after  date.  The  instrument  is  at 
maturity on the third day after the 28th February, 1878. 

  (b) A negotiable instrument, dated 30th August, 1878, it made payable three months after date. The instrument is at maturity 
on the 3rd December, 1878. 

  (c) A promissory note or bill of exchange, dated 31st August, 1878, is made payable three months after date. The instrument 
is at maturity on the 3rd December, 1878.

24. **Calculating maturity of bill or note payable so many days after date or sight.**—In calculating 
the date at which a promissory note or bill of exchange made payable a certain number of days after date 
or after sight or after a certain event is at maturity, the day of the date, or of presentment for acceptance or 
sight, or of protest for non-acceptance, or on which the event happens, shall be excluded. 

25. **When day of maturity is a holiday.**—When  the  day  on  which  a  promissory  note  or  bill  of 
exchange  is  at  maturity  is  a  public  holiday,  the  instrument  shall  be  deemed  to  be  due  on  the  next 
preceding, business day. 

*Explanation.*—The expression “public holiday” includes Sundays: and any other day declared by 
the Central Government, by notification in the Official Gazette, to be a public holiday. 

###CHAPTER III 

###PARTIES TO NOTES, BILLS AND CHEQUES. 

26. **Capacity to make, etc., promissory notes, etc.**—Every person capable of contracting, according 
to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, 
indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque. 

**Minor.**—A minor may draw, indorse, deliver and negotiate such instrument so as to bind all parties 
except himself. 

  Nothing herein contained shall be deemed to empower a corporation to make, indorse or accept such 
instruments except in cases in which, under the law for the time being in force, they are so empowered. 

27. **Agency.**— Every person capable of binding himself or of being bound, as mentioned in section 
26, may so bind himself or be bound by a duly authorized agent acting in his name. 

  A general authority to transact business and to receive and discharge debts does not confer upon an 
agent the power of accepting or indorsing bills of exchange so as to bind his principal. 

  An authority to draw bills of exchange does not of itself import an authority to indorse. 

28. **Liability of agent signing.**—An agent who signs his name to a promissory note, bill of exchange 
or cheque without indicating thereon that he signs as agent, or that he does not intend thereby to incur 
personal responsibility, is liable personally on the instrument, except to those who induced him to sign 
upon the belief that the principal only would be held liable. 

29. **Liability  of  legal  representative  signing.**—A  legal  representative  of  a  deceased  person  who 
signs  his  name  to  a  promissory  note,  bill  of  exchange  or  cheque  is  liable  personally  thereon  unless  he 
expressly limits his liability to the extent of the assets received by him as such. 

30. **Liability of drawer.**—The drawer of a bill of exchange or cheque is bound, in case of dishonour 
by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonour has been 
given to, or received by, the drawer as hereinafter provided. 

31. **Liability of drawee of cheque.**—The drawee of a cheque having sufficient funds of the drawer in his 
hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, 
and , in default of such payment, must compensate the drawer for any loss or damage caused by such default. 

32. **Liability of maker of note and acceptor of bill.**—In the absence of a contract to the contrary, the 
maker  of  a  promissory  note  and  the  acceptor  before  maturity  of  a  bill  of  exchange  are  bound  to  pay  the 
amount thereof at  maturity according  to the  apparent tenor  of  the  note  or  acceptance respectively, and the 
acceptor of a bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand. 

  In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to 
the note or bill for any loss or damage sustained by him and caused by such default. 

33. **Only drawee can be acceptor except in need or for honour.**—No person except the drawee of 
a bill exchange, or all or some of several drawees, or a person named therein as a drawee in case of need, 
or an acceptor for honour, can bind himself by an acceptance. 

34. **Acceptance  by  several  drawees  not  partners.**—Where there are several drawees  of  a  bill  of 
exchange who are not partners, each of them can accept it for himself, but none of them can accept it for 
another without his authority. 

35. **Liability of indorser.**—In the absence of a contract to the contrary, whoever indorses and delivers a 
negotiable  instrument  before  maturity  without,  in  such  it  indorsement,  expressly  excluding  or  making 
conditional  his  own  liability,  is  bound  thereby  to  every  subsequent  holder,  in  case  of  dishonour  by  the 
drawee,  acceptor  or  maker,  to  compensate  such  holder  for  any  loss  or  damage  caused  to  him  by  such 
dishonour, provided due notice of dishonour has been given to, or received by, such indorser as hereinafter 
provided. 

  Every indorser after dishonour is liable as upon an instrument payable on demand. 

36. **Liability of prior parties to holder in due course.**—Every prior party to a negotiable instrument 
is liable thereon to a holder in due course until the instrument is duly satisfied. 

37. **Maker, drawer and acceptor principals.**—The maker of a promissory note or cheque, the drawer of 
a  bill  of  exchange  until  acceptance,  and  the  acceptor  are,  in  the  absence  of  a  contract  to  the  contrary, 
respectively liable thereon as principal debtors, and the other parties thereto are liable thereon as sureties for 
the maker, drawer or acceptor, as the case may be. 

38. **Prior party a principal in respect of each subsequent party.**—As between the parties so liable 
as  sureties,  each  prior  party  is,  in  the  absence  of  a  contract  to  the  contrary,  also  liable  thereon  as  a 
principal debtor in respect of each subsequent party. 

*Illustration*

  A draws  a  bill  payable  to his own order on  B,  who  accepts.  A  afterwards  indorses  the  bill  to  C, C  to  D,  and  D  to  E.  As 
between E and B, B is the principal debtor, and A, C and D are his sureties. As between E and A, A is the principal debtor, and C 
and D are his sureties. As between E and C, C is the principal debtor and D is his surety. 

39. **Suretyship.**—When the holder of an accepted bill of exchange enters into any contract with the 
acceptor which, under section 134 or 135 of the Indian Contract Act, 1872 (9 of 1872), would discharge 
the other parties, the holder may expressly reserve his right to charge the other parties, and in such case 
they are not discharged. 

40. **Discharge  of  indorser's  liability.**—Where  the  holder  of  a  negotiable  instrument,  without  the 
consent  of  the  indorser,  destroys  or  impairs  the  indorser’s  remedy  against  a  prior  party,  the  indorser  is 
discharged from liability to the holder to the same extent as if the instrument had been paid at maturity. 

*Illustration*

  A is  the holder of  a bill of  exchange  made  payable to the order of  B,  which  contains the  following  indorsements in 
blank:— 

  First indorsement, “B”. 

  Second indorsement, “Peter Williams”. 

  Third indorsement, “Wright & Co.” 

  Fourth indorsement. “John Rozario”. 

  This  bill  A  puts  in  suit  against  John  Rozario  and  strikes  out,  without  John  Rozario's  consent,  the  indorsements  by  Peter 
Williams and Wright & Co. A is not entitled to recover anything from John Rozario. 

41. **Acceptor  bound,  although,  indorsement  forged.**—An  acceptor  of  a  bill  of  exchange  already 
indorsed is not relieved from liability by reason that such indorsement is forged, if he knew or had reason 
to believe the indorsement to be forged when he accepted the bill. 

42. **Acceptance  of  bill  drawn  in  fictitious  name.**—An acceptor of a bill  of  exchange  drawn  in  a 
fictitious name and payable to the drawer's order is not, by reason that such name is fictitious, relieved 
from liability to any holder in due course claiming under an indorsement by the same hand as the drawer's 
signature, and purporting to be made by the drawer. 

43. **Negotiable  instrument  made,  etc.,  without  consideration.**—A  negotiable  instrument  made, 
drawn, accepted, indorsed or transferred without consideration, or for a consideration which fails, creates 
no obligation of payment between the parties to the transaction. But if any such party has transferred the 
instrument with or without indorsement to a holder for consideration, such holder, and every subsequent 
holder  deriving  title  from  him,  may  recover  the  amount  due  on  such  instrument  from  the  transferor  for 
consideration or any prior party thereto. 

*Exception* I.—No  party  for  whose  accommodation  a  negotiable  instrument  has  been  made,  drawn, 
accepted  or  indorsed  can,  if  he  have  paid  the  amount  thereof,  recover  thereon  such  amount  from  any 
person who became a party to such instrument for his accommodation. 

*Exception* II.—No party to the instrument who has induced any other party to make, draw, accept, indorse 
or  transfer  the  same  to  him  for  a  consideration  which  he  has  failed  to  pay  or  perform  in  full  shall  recover 
thereon an amount exceeding the value of the consideration (if any) which he has actually paid or performed. 

44. **Partial  absence  or  failure  of  money-consideration.**—When  the  consideration  for  which  a 
person  signed  a  promissory  note,  bill  of  exchange  or  cheque  consisted  of  money,  and  was  originally 
absent in part or has subsequently failed in part, the sum which a holder standing in immediate relation 
with such signer is entitled to receive from him is proportionally reduced. 

*Explanation.*—The drawer of a bill of exchange stands in immediate relation with the acceptor. The 
maker of a promissory note, bill of exchange or cheque stands in immediate relation with the payee, and 
the indorser with his indorsee. Other signers may by agreement stand in immediate relation with a holder. 

*Illustration*

  A  draws  a  bill  on  B  for  Rs.  500  payable  to  the  order  of  A,  B  accepts  the  bill,  but  subsequently  dishonours ,  it  by 
non-payment. A sues B on the bill, B proves that it was accepted for value as to Rs. 400, and as an accommodation to 
the plaintiff as to the residue. A can only recover Rs. 400. 

45. **Partial  failure  of  consideration  not  consisting  of  money.**—Where a part of the consideration 
for which a person signed a promissory note, bill of exchange or cheque, though not consisting of money, 
is  ascertainable  in  money  without  collateral  enquiry,  and  there  has  been  a  failure  of  that  part,  the  sum 
which  a  holder  standing  in  immediate  relation  with  such  signer  is  entitled  to  receive  from  him  is 
proportionally reduced. 

45A. **Holder's right to duplicate of lost bill.**—Where a bill of exchange has been lost before it is 
over-due,  the  person  who  was  the  holder  of it  may  apply  to  the  drawer  to  give  him  another  bill  of  the 
same tenor, giving security to the drawer, if required, to indemnify him against all persons whatever in 
case the bill alleged to have been lost shall be found again. 

  If the drawer on request as aforesaid refuses to give such duplicate bill, he may be compelled to do 
so.

###CHAPTER IV 

###OF NEGOTIATION 

46. **Delivery.**—The  making,  acceptance  or  indorsement  of  a  promissory  note,  bill  of  exchange  or 
cheque is completed by delivery, actual or constructive. 

  As between parties standing in immediate relation, delivery to be effectual must be made by the party 
making, accepting or indorsing the instrument, or by a person authorized by him in that behalf. 

  As between such parties and any holder of the instrument other than a holder in due course, it may be 
shown  that  the  instrument  was  delivered  conditionally  or  for  a  special  purpose  only,  and  not  for  the 
purpose of transferring absolutely the property therein. 

  A promissory note, bill of exchange or cheque payable to bearer is negotiable by the delivery thereof. 

  A promissory  note,  bill  of  exchange  or  cheque  payable  to  order  is  negotiable  by  the  holder  by 
indorsement and delivery thereof. 

47. **Negotiation by delivery.**—Subject  to  the  provisions  of  section  58,  a  promissory  note,  bill  of 
exchange or cheque payable to bearer is negotiable by delivery thereof. 

*Exception.*—A  promissory  note,  bill  of  exchange  or  cheque  delivered  on  condition  that  it  is  not  to 
take effect except in a certain event is not negotiable (except in the hands of a holder for value without 
notice of the condition) unless such event happens. 

*Illustrations*

  (a) A, the holder of a negotiable instrument payable to bearer, delivers it to B's agent to keep for B. The instrument has been 
negotiated. 

  (b) A, the holder of a negotiable instrument payable to bearer, which is in the hands of A's banker, who is at the time the 
banker of B, directs the banker to transfer the instrument to B's credit in the banker's account with B. The banker does so,  and 
accordingly now possesses the instrument as B's agent. The instrument has been negotiated, and B has become the holder of it. 

48. **Negotiation by indorsement.**—Subject to the provisions of section 58, a promissory note, bill of 
exchange or cheque payable to order, is negotiable by the holder by indorsement and delivery thereof. 

49. **Conversion  of  indorsement  in  blank  into  indorsement  in  full.**—The  holder  of  a  negotiable 
instrument  indorsed  in  blank  may,  without  signing  his  own  name,  by  writing  above  the  indorser’s 
signature  a  direction  to  pay  to  any  other  person  as  indorsee,  convert  the  indorsement  in  blank  into  an 
indorsement in full; and the holder does not thereby incur the responsibility of an indorser. 

50. **Effect of indorsement.**—The  indorsement  of  a  negotiable  instrument  followed  by  delivery 
transfers  to  the  indorsee  the  property  therein  with  the  right  of  further  negotiation;  but  the  indorsement 
may, by express words, restrict or exclude such right, or may merely constitute the indorsee an agent to 
indorse the instrument, or to receive its contents for the indorser, or for some other specified person. 

*Illustrations*

B signs the following indorsements on different negotiable instruments payable to bearer. — 

  (a) “Pay the contents to C only”. 

  (b) “Pay C for my use.” 

  (c)  “Pay C or order for the account of B.” 

  (d) “the within must be credited to C.” 

These indorsements exclude the right of further negotiation by C. 

  (e) “P a y  C. ” 

  (f) “Pay C value in account with the Oriental Bank.” 

  (g) “Pay the contents to C, being part of the consideration in a certain deed of assignment executed by C to the indorser 
and others.” 

These indorsements do not exclude the right of further negotiation by C. 

51. **Who may negotiate.**—Every  sole  maker,  drawer,  payee  or  indorsee,  or  all  of  several  joint 
makers,  drawers,  payees  or  indorsees,  of  a  negotiable  instrument  may,  if  the  negotiability  of  such 
instrument has not been restricted or excluded as mentioned in section 50, indorse and negotiate the same. 

*Explanation.*—Nothing  in  this  section  enables  a  maker  or  drawer  to  indorse  or  negotiate  an 
instrument, unless he is in lawful possession or is holder thereof; or enables a payee or indorsee to indorse 
or negotiate an instrument, unless he is holder thereof. 

*Illustration*

  A  bill  is  drawn  payable  to  A  or  order.  A  indorses  it  to  B,  the  indorsement  not  containing  the  words  “or  order”  or  any 
equivalent words. B may negotiate the instrument. 

52. **Indorser who excludes his own liability or makes it conditional.**—The indorser of a negotiable 
instrument  may,  by  express  words  in  the  indorsement,  exclude  his  own  liability  thereon,  or  make  such 
liability or the right of the indorsee to receive the amount due thereon depend upon the happening of a 
specified event, although such event may never happen. 

  Where an indorser so excludes his liability and afterwards becomes the holder of the instrument, all 
intermediate indorsers are liable to him. 

*Illustrations*

  (a) The indorser of a negotiable instrument sign; his name adding the words— “Without recourse”. 

  Upon this indorsement he incurs no liability. 

  (b) A  is  the  payee  and  holder  of  a  negotiable  instrument.  Excluding  personal  liability  by  an  indorsement 
“without  recourse”  he  transfers  the  instrument  to  B,  and  B  indorses  it  to  C,  who  indorses  it  to  A.  A  is  not  only 
reinstated in his former rights, but has the rights of an indorsee against B and C. 

53. **Holder deriving title from holder in due course.**—A holder  of  a  negotiable  instrument  who 
derives title from a holder in due course has the rights thereon of that holder in due course. 

54. **Instrument indorsed in blank.**—Subject to the provisions hereinafter contained as to crossed 
cheques,  a  negotiable  instrument  indorsed  in  blank  is  payable  to  the  bearer  thereof  even  although 
originally payable to order. 

55. **Conversion  of  indorsement  in  blank  into  indorsement  in  full.**—If  a  negotiable  instrument, 
after  having  been  indorsed  in  blank,  is  indorsed  in  full,  the  amount  of  it  cannot  be  claimed  from  the 
indorser in full, except by the  person to whom it has been  indorsed in full, or by one who derives title 
through such person. 

56. **Indorsement for part of sum due.**—No  writing  on  a  negotiable  instrument  is  valid  for  the 
purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due 
on the instrument; but where such amount has been partly paid, a note to that effect may be indorsed on 
the instrument, which may then be negotiated for the balance. 

57. **Legal representative cannot by delivery only negotiate instrument indorsed by deceased.**—
The legal representative of a deceased person cannot negotiate by delivery only a promissory note, bill of 
exchange or cheque payable to order and indorsed by the deceased but not delivered. 

58. **Instrument obtained by unlawful means or for unlawful consideration.**—When a negotiable 
instrument has been lost, or has been obtained from any maker, acceptor or holder thereof by means of an 
offence  or  fraud,  or  for  an  unlawful  consideration,  no  possessor  or  indorsee  who  claims  through  the 
person who found or so obtained the instrument is entitled to receive the amount due thereon from such 
maker, acceptor or holder, or from any party prior to such holder, unless such possessor or indorsee is, or 
some person through whom he claims was, a holder thereof in due course. 

59. **Instrument  acquired  after  dishonour  or  when  overdue.**—The  holder  of  a  negotiable 
instrument, who has acquired it after dishonour, whether by non-acceptance or non-payment, with notice 
thereof, or after maturity, has only, as against the other parties, the rights thereon of his transferor: 

**Accommodation note or bill.**—Provided that any person who, in good faith and for consideration, 
becomes  the  holder,  after  maturity,  of  a  promissory  note  or  bill  of  exchange  made,  drawn  or  accepted 
without  consideration,  for  the  purpose  of  enabling  some  party  thereto  to  raise  money  thereon,  may 
recover the amount of the note or bill from any prior party. 

*Illustration*

  The acceptor of a bill of exchange, when he accepted it, deposited with the drawer certain goods as a collateral security for 
the payment of the bill, with power to the drawer to sell the goods and apply the proceeds in discharge of the bill if it were not 
paid at maturity. The bill not having been paid at maturity, the drawer sold the goods and retained the proceeds, but indorsed the 
bill to A. A's title is subject to the same objection as the drawer's title. 

60. **Instrument  negotiable  till  payment  or  satisfaction.**—A negotiable  instrument  may  be 
negotiated (except by the maker, drawee or acceptor after maturity) until payment or satisfaction thereof 
by the maker, drawee or acceptor at or after maturity, but not after such payment or satisfaction. 

###CHAPTER V 

###OF PRESENTMENT 

61. **Presentment for acceptance.**—A bill of exchange payable after sight must, if no time or place is 
specified  therein  for  presentment,  be  presented  to  the  drawee  thereof  for  acceptance,  if  he  can,  after 
reasonable search, be found, by a person entitled to demand acceptance, within a reasonable time after it 
is  drawn,  and  in  business  hours  on  a  business  day.  In  default  of  such  presentment,  no  party  thereto  is 
liable thereon to the person making such default. 

  If the drawee cannot, after reasonable search, be found, the bill is dishonoured. 

  If the bill is directed to the drawee at a particular place, it must be presented at that place; and if at the 
due date for presentment he cannot, after reasonable search, be found there, the till is dishonoured. 

  Where authorized by agreement or usage, a presentment through the post office by means of a registered 
letter is sufficient.

62. **Presentment of promissory note for sight.**—A promissory note, payable at a certain period after 
sight, must be presented to the maker thereof for sight (if he can after reasonable search be found) by a person 
entitled to demand payment, within a reasonable time after it is made and in business hours on a business day. 
In default of such presentment, no party thereto is liable thereon to the person making such default. 

63. **Drawee’s time for deliberation.**—The  holder  must,  if  so  required  by  the  drawee  of  a  bill  of 
exchange  presented  to  him  for  acceptance,  allow  the  drawee forty-eight hours  (exclusive  of  public 
holidays) to consider whether he will accept it. 

64. **Presentment for payment.**— (1) Promissory  notes,  bills  of  exchange  and  cheques  must  be 
presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder 
as hereinafter provided. In default of such presentment, the other parties thereto are not liable thereon to 
such holder. 

  Where  authorized  by  agreement  or  usage,  a  presentment  through  the  post  office  by  means  of  a 
registered letter is sufficient.

  *Exception.*—Where a promissory note is payable on demand and is not payable at a specified place, 
no presentment is necessary in order to charge the maker thereof. 

(2) Notwithstanding  anything  contained  in  section  6,  where  an  electronic  image  of  a  truncated 
cheque is presented for payment, the drawee bank is entitled to demand any further information regarding 
the  truncated  cheque  from  the  bank  holding  the  truncated  cheque  in  case  of  any  reasonable  suspicion 
about  the  genuineness  of  the  apparent  tenor  of  instrument,  and  if  the  suspicion  is  that  of  any  fraud, 
forgery, tampering or destruction of the instrument, it is entitled to further demand the presentment of the 
truncated cheque itself for verification: 

  Provided  that  the  truncated  cheque  so  demanded  by  the  drawee  bank  shall  be  retained  by  it,  if  the 
payment is made accordingly.

65. **Hours for presentment**—Presentment  for  payment  must  be  made  during  the  usual  hours  of 
business and, if at a banker's within banking hours. 

66. **Presentment  for  payment  of  instrument  payable  after  date  or  sight**—A promissory note or 
bill  of  exchange,  made  payable  at  a  specified  period  after  date  or  sight  thereof,  must  be  presented  for 
payment at maturity. 

67. **Presentment  for  payment  of  promissory  note  payable  by  instalments.**—A  promissory  note 
payable by instalments must be presented for payment on the third day after the date fixed for payment of 
each  instalment;  and  non-payment  on  such  presentment  has  the  same  effect  as  non-payment  of  a  note  at 
maturity. 

68. **Presentment  for  payment  of  instrument  payable  at  specified  place  and  not  elsewhere.**—A 
promissory note, bill of exchange or cheque made, drawn or accepted payable at a specified place and not 
elsewhere must, in order to charge any party thereto, be presented for payment at that place. 

69. **Instrument payable at specified place.**—A promissory note or bill of exchange made, drawn or 
accepted payable at a specified place must, in order to charge the maker or drawer thereof, be presented 
for payment at that place. 

70. **Presentment where no exclusive place specified.**—A promissory note or bill of exchange, not 
made payable as mentioned in sections 68 and 69, must be presented for payment at the place of business 
(if any), or at the usual residence, of the maker, drawee or acceptor thereof, as the case may be. 

71. **Presentment when maker, etc., has no known place of business or residence.**—If the maker, 
drawee or acceptor of a negotiable instrument has no known place of business or fixed residence, and no 
place is specified in the instrument for presentment for acceptance or payment such presentment  may be 
made to him in person wherever he can be found. 

72. **Presentment of cheque to charge drawer.**— Subject to the provisions of section 84, a cheque 
must, in order to charge the drawer, be presented at the bank upon which it is drawn before the relation 
between the drawer and his banker has been altered to the prejudice of the drawer. 

73. **Presentment of cheque to charge any other person.**—A cheque must, in order to charge any 
person except the drawer, be presented within a reasonable time after delivery thereof by such person. 

74. **Presentment  of  instrument  payable  on  demand.**—Subject  to  the  provisions  of  section  31,  a 
negotiable instrument payable on demand must be presented for payment within a reasonable time after it 
is received by the holder. 

75. **Presentment  by  or  to  agent,  representative  of  deceased,  or  assignee  of  insolvent.**—
Presentment for acceptance or payment may be made to the duly authorized agent of the drawee, maker 
or  accept  or,  as  the  case  may  be,  or,  where  the  drawee,  maker  or  acceptor  has  died,  to  his  legal 
representative, or, where he has been declared an insolvent, to his assignee. 

75A. **Excuse for delay in presentment for acceptance or payment**—Delay in presentment for 
acceptance or payment is  excused  if  the  delay  is  caused  by  circumstances  beyond  the  control  of  the 
holder,  and  not  imputable  to  his  default,  misconduct  or  negligence.  When  the  cause  of  delay  ceases  to 
operate, presentment must be made within a reasonable time.

76. **When presentment unnecessary.**—No presentment for payment is necessary, and the instrument 
is dishonoured at the due date for presentment, in any of the following cases:— 

  (a) if the maker, drawee or acceptor intentionally prevents the presentment of the instrument, 
or, 

  if the instrument being payable at his place of business, he closes such place on a business day 
during the usual business hours, or, 

  if  the  instrument  being  payable  at  some  other  specified  place,  neither  he  nor  any  person 
authorized to pay it attends at such place during the usual business hours, or, 

  if  the  instrument  not  being  payable  at  any  specified  place,  he  cannot  after  due  search  be 
found; 

  (b) as against any party sought to be charged therewith, if he has engaged to pay notwithstanding 
non-presentment; 

  (c) as  against  any  party  if,  after  maturity,  with  knowledge  that  the  instrument  has  not  been 
presented— 
  he makes a part payment on account of the amount due on the instrument, 
  or promises to pay the amount due thereon in whole or in part, 
  or otherwise waives his right to take advantage of any default in presentment for payment; 

  (d) as  against  the  drawer,  if  the  drawer  could  not  suffer  damage  from  the  want  of  such 
presentment. 

77. **Liability of banker for negligently dealing with bill presented for payment.**—When a bill of 
exchange,  accepted  payable  at  a  specified  bank,  has  been  duly  presented  there  for  payment  and 
dishonoured, if the banker so negligently or improperly keeps, deals with or delivers back such bill as to 
cause loss to the holder, he must compensate the holder for such loss. 

###CHAPTER VI 

###OF PAYMENT AND INTEREST 

78. **To  whom  payment  should  be  made.**—Subject  to  the  provisions  of  section  82,  clause  (c), 
payment of the amount due on a promissory note, bill of exchange or cheque must, in order to discharge 
the maker or acceptor, be made to the holder of the instrument. 

79. **Interest when rate specified.**—When interest at a specified rate is expressly made payable on a 
promissory note or bill of exchange, interest shall be calculated at the rate specified, on the amount of the 
principal money due thereon, from the date of the instrument, until tender or realization of such amount, 
or until such date after the institution of a suit to recover such amount as the Court directs. 

80. **Interest when no rate specified.**—  When  no  rate  of  interest  is  specified  in  the  instrument, 
interest on the amount due thereon shall, notwithstanding any agreement relating to interest between any 
parties to the instrument, be calculated at the rate of eighteen per centum per annum, from the date at 
which the same ought to have been paid by the party charged, until tender or realization of the amount 
due thereon, or until such date after the institution of a suit to recover such a mount as the Court directs. 

*Explanation.*—When the party charged is the indorser of an instrument dishonoured by non-payment, 
he is liable to pay interest only from the time that he receives notice of the dishonour. 

81. **Delivery of instrument on payment or indemnity in case of loss.**— (1) Any person liable to 
pay, and called upon by the holder thereof to pay, the amount due on a promissory note, bill of exchange 
or cheque is before payment entitled to have it shown, and is on payment entitled to have it delivered up, 
to  him,  or  if  the  instrument  is  lost  or  cannot  be  produced,  to  be  indemnified  against  any  further  claim 
thereon against him. 

(2) Where  the  cheque  is  an  electronic  image  of  a  truncated  cheque,  even  after  the  payment  the 
banker who received the payment shall be entitled to retain the truncated cheque. 

(3) A certificate issued on the foot of the printout of the electronic image of a truncated cheque by the 
banker who paid the instrument, shall be prima facie proof of such payment.

###CHAPTER VII 

###OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES 

82. **Discharge from liability.**—The  maker,  acceptor  or  indorser  respectively  of  a  negotiable 
instrument is discharged from liability thereon— 

  (a) **by cancellation.**—to a holder thereof  who cancels such acceptor's or indorser’s name with 
intent to discharge him, and to all parties claiming under such holder; 

  (b) **by release.**—to a holder thereof who otherwise discharges such maker, acceptor or indorser, 
and to all parties deriving title under such holder after notice of such discharge; 

  (c) **by payment.**—to  all  parties  thereto,  if  the  instrument  is  payable  to  bearer,  or  has  been 
indorsed in blank, and such maker, acceptor or indorser makes payment in due course of the amount 
due thereon. 

83. **Discharge by allowing drawee more than forty-eight hours to accept.**—If the holder of a bill 
of exchange allows the drawee more than forty-eight hours, exclusive of public holidays, to consider 
whether  he  will  accept  the  same,  all  previous  parties  not  consenting  to  such  allowance  are  thereby 
discharge from liability to such holder. 

84. **When cheque not duly presented and drawer damaged thereby.**—(1) Where a cheque is not 
presented for payment within a reasonable time of its issue, and the drawer or person on whose account it 
is drawn had the right, at the time when presentment ought to have been made, as between himself and 
the banker, to have the cheque paid and suffers actual damage through the delay, he is discharged to the 
extent  of such damage,  that  is  to  say,  to the extent  to  which  such  drawer  or  person  is  a  creditor  of  the 
banker to a large amount than he would have been if such cheque had been paid. 

(2) In determining what is a reasonble time, regard shall be had to the nature of the instrument, the 
usage of trade and of bankers, and the facts of the particular case. 

(3) The holder of the cheque as to which such drawer of person is so discharged shall be a creditor, in 
lieu of such drawer or person, of such banker to the extent of such discharge and entitled to recover the 
amount from him. 

*Illustrations*

  (a) A draws a cheque for Rs. 1,000, and, when the cheque ought to be presented, has funds at the bank to meet 
it. The bank fails before the cheque is presented. The d rawer is discharged, but the holder can prove against the bank 
for the amount of the cheque. 

  (b) A draws a cheque at Umballa on a bank in Calcutta. The bank fails before the cheque could be presented in 
ordinary  course.  A  is  not  discharged,  for  he  has  not  suffered  actual  damage  through  any  delay  in  presenting  the 
cheque.

85. **Cheque payable to order.**— (1) Where a cheque payable to order purports to be endorsed by or 
on behalf of the payee, the drawee is discharged by payment in due course. 

(2) Where  a  cheque  is  originally  expressed to  be payable  to  bearer, the  drawee  is  discharged 
by payment in due course to the bearer thereof, notwithstanding any endorsement whether in full or 
in  blank  appearing  thereon,  and  notwithstanding  that  any  such  endorsement  pu rports  to  restrict  or 
exclude further negotiation.

85A. **Drafts drawn by one branch of a bank on another payable to order.**—where any draft, that 
is an order to pay money, drawn by one office of a bank upon another office of the same bank for a sum 
of money payable to order on demand, purports to be endorsed by or on behalf of the payee, the bank is 
discharged by payment in due course.

86. **Parties not consenting discharged by qualified or limited acceptance.**—If the holder of a 
bill of exchange acquiesces in a qualified acceptance, or one limited to part of the sum mentioned in 
the bill, or which substitutes a different place or time for payment, or which, where the drawees are 
not partners, is  not signed  by  all the drawees, all  previous  parties  whose  consent is not obtained to 
such acceptance are discharged as against the holder and those claiming under him, unless on notice 
given by the holder they assent to such acceptance. 

*Explanation.*—An acceptance is qualified 

  (a) where it is conditional, declaring the payment to be dependent on the happening of an event 
therein stated; 

  (b) where it undertakes the payment of part only of the sum ordered to be paid; 

  (c) where  no  place  of  payment  being  specified  on  the  order,  it  undertakes  the  payment  at  a 
specified place, and not otherwise or elsewhere; or where, a place of payment being specified in the 
order, it undertakes the payment at some other place and not otherwise or elsewhere; 

  (d) where it undertakes the payment at a time other than that at which under the order it would be 
legally due. 

87. **Effect of material alteration.**—Any  material  alteration  of  a  negotiable  instrument  renders  the 
same  void  as against  anyone  who is a  party  thereto at the  time  of  making  such  alteration  and  does  not 
consent thereto, unless it was made in order to carry out the common intention of the original parties; 

**Alteration  by  indorsee.**—And any such alteration, if made by an indorsee, discharges his indorser 
from all liability to him in respect of the consideration thereof. 

  The provisions of this section are subject to those of sections 20, 49, 86 and 125. 

88. **Acceptor or indorser bound notwithstanding previous alteration.**—An acceptor or indorser of 
a  negotiable  instrument  is  bound  by  his  acceptance  or  indorsement  notwithstanding  any  previous 
alteration of the instrument. 

89. **Payment of instrument on which alteration is not apparent.**— (1) Where a promissory note, 
bill  of  exchange  or  cheque  has  been  materially  altered  but  does  not  appear  to  have  been  so  altered,  or 
where a cheque is presented for payment which does not at the time of presentation appear to be crossed 
or to have had a crossing which has been obliterated, payment thereof by a person or banker liable to pay, 
and paying the same according to the apparent tenor thereof at the time of payment and otherwise in due 
course,  shall  discharge  such  person  or  banker from  all liability  thereon;  and  such  payment  shall  not  be 
questioned by reason of the instrument having been altered or the cheque crossed. 

(2) Where the cheque is an electronic image of a truncated cheque, any difference in apparent tenor 
of such electronic image and the truncated cheque shall be a material alteration and it shall be the duty of 
the  bank  or  the  clearing  house,  as  the  case  may  be,  to  ensure  the  exactness  of  the  apparent  tenor  of 
electronic image of the truncated cheque while truncating and transmitting the image. 

(3) Any bank or a clearing house which receives a transmitted electronic image of a truncated cheque, 
shall verify from the party who transmitted the image to it, that the image so transmitted to it and received 
by it, is exactly the same.

90. **Extinguishment  of  rights  of  action  on  bill  in  acceptor's  hands.—If a bill of exchange which 
has  been  negotiated  is,  at  or  after  maturity,  held  by  the  acceptor  in  his  own  right,  all  rights  of  action 
thereon are extinguished. 

###CHAPTER VIII 

###OF NOTICE OF DISHONOUR 

91. **Dishonour by non-acceptance.**—A bill of exchange is said to be dishonoured by non-acceptance 
when the drawee, or one of several drawees not being partners, makes default in acceptance upon being 
duly required to accept the bill, or where presentment is excused and the bill is not accepted. 

  Where the drawee is incompetent to contract, or the acceptance is qualified the bill may be treated as 
dishonoured. 

92. **Dishonour by non-payment.**—A  promissory  note,  bill  of  exchange  or  cheque  is  said  to  be 
dishonoured  by  non-payment  when the  maker  of the note,  acceptor  of the  bill  or  drawee  of the  cheque 
makes default in payment upon being duly required to pay the same. 

93. **By and to whom notice should be given.**—When a promissory note, bill of exchange or cheque 
is dishonoured by non-acceptance or non-payment, the holder thereof, or some party thereto who remains 
liable thereon, must give notice that the instrument has been so dishonoured to all other parties whom the 
holder seeks to make severally liable thereon, and to some one of several parties whom he seeks to make 
jointly liable thereon. 

  Nothing in this section renders it necessary to give notice to the maker of the dishonoured promissory 
note or the drawee or acceptor of the dishonoured bill of exchange or cheque. 

94. **Mode in which notice may be given.**—Notice of dishonour may be given to a duly authorized agent 
of the person to whom it is required to be given, or, where he has died, to his legal representative, or, where he 
has been declared an insolvent, to his assignee; may be oral or written; may, if written, be sent by post; and 
may be in any form; but it must inform the party to whom it is given, either in express terms or by reasonable 
intendment, that the instrument has been dishonoured, and in what way, and that he will be held liable thereon; 
and it must be given within a reasonable time after dishonour, at the place of business or (in case such party 
has no place of business) at the residence of the party for whom it is intended. 

  If the notice is duly directed and sent by post and miscarries, such miscarriage does not render the 
notice invalid. 

95. **Party receiving must transmit notice of dishonour.**—Any party receiving notice of dishonour 
must, in order to render any prior party liable to himself, give notice of dishonour to such party within a 
reasonable time, unless such party otherwise receives due notice as provided by section 93. 

96. **Agent for presentment.**—When the instrument is deposited with an agent for presentment, the 
agent is entitled to the same time to give notice to his principal as if he were the holder giving notice of 
dishonour, and the principal is entitled to a further like period to give notice of dishonour. 

97. **When  party  to whom  notice  given  is  dead.**—when the party to whom notice of dishonour is 
dispatched is dead, but the party dispatching the notice is ignorant of his death, the notice is sufficient. 

98. **When notice of dishonour is unnecessary.**—No notice of dishonour is necessary— 

  (a) when it is dispensed with by the party entitled thereto; 

  (b) in order to charge the drawer, when he has countermanded payment; 

  (c) when the party charged could not suffer damage for want of notice; 

  (d) when the party entitled to notice cannot after due search be found; or the party bound to give 
notice is, for any other reason, unable without any fault of his own to give it; 

  (e) to charge the drawers, when the acceptor is also a drawer; 

  (f) in the case of a promissory note which is not negotiable; 

  (g) when  the  party  entitled  to  notice,  knowing  the  facts,  promises  unconditionally  to  pay  the 
amount due on the instrument. 

###CHAPTER IX 

###OF NOTING AND PROTEST 

99. **Noting.**—When a promissory note or bill of exchange has been dishonoured by non-acceptance 
or non-payment, the holder may cause such dishonour to be noted by a notary public upon the instrument, 
or upon a paper attached thereto, or partly upon each. 

  Such note  must  be  made  within  a  reasonable  time  after  dishonour,  and  must  specify  the  date  of 
dishonour,  the  reason,  if  any,  assigned  for  such  dishonour,  or, if the instrument  has  not  been  expressly 
dishonoured, the reason why the holder treats it as dishonoured, and the notary's charges. 

100. **Protest.**—When a promissory note or bill of exchange has been dishonoured by non-acceptance 
or non-payment, the holder may, within a reasonable time, cause such dishonour to be noted and certified 
by a notary public. Such certificate is called a protest. 

**Protest for better security.**—When the acceptor of a bill of exchange has become insolvent, or 
his  credit  has  been  publicly  impeached,  before  the  maturity  of  the  bill,  the  holder  may,  within  a 
reasonable  time,  cause  a  notary  public  to  demand  better  security  of  the  acceptor,  and  on  its  being 
refused  may,  within  a  reasonable  time,  cause  such  facts  to  be  noted  and  certified  as  aforesaid.  Such 
certificate is called a protest for better security. 

101. **Contents of protest.**—A protest under section 100 must contain— 

  (a) either the instrument itself, or a literal transcript of the instrument and of everything written 
or printed thereupon; 

  (b) the name of the person for whom and against whom the instrument has been protested; 

  (c) a  statement  that  payment  or  acceptance,  or  better  security,  as  the  case  may  be,  has  been 
demanded of such person by the notary public; the terms of his answer, if any, or a statement that he 
gave no answer, or that he could not be found; 

  (d) when the note or bill has been dishonoured, the place and time of dishonour, and, when better 
security has been refused, the place and time of refusal; 

  (e) the subscription of the notary public making the protest; 

  (f) in the event of an acceptance for honour or of a payment for honour, the name of the person by 
whom, of the person for whom, and the manner in which, such acceptance or payment was offered 
and effected. 

  A notary public may make the demand mentioned in clause (c) of this section either in person or 
by his clerk or, where authorized by agreement or usage, by registered letter.

102. **Notice of protest.**—When  a  promissory  note  or  bill  of  exchange  is  required  by  law  to  be 
protested, notice of such protest must be given instead of notice of dishonour, in the same manner and 
subject to the same conditions; but the notice may be given by the notary public who makes the protest. 

103. **Protest for non-payment after dishonour by non-acceptance.**—All bills of exchange drawn 
payable  at  some  other  place  than  the  place  mentioned  as  the  residence  of  the  drawee,  and  which  are 
dishonoured  by  non-acceptance,  may,  without  further  presentment  to  the  drawee,  be  protested  for  non-
payment, in the place specified for payment, unless paid before or at maturity. 

104. **Protest of foreign bills.**—Foreign bills of exchange must be protested for dishonour when such 
protest is required by the law of the place where they are drawn. 

104A. **When  noting equivalent to  protest.**—For the purposes of this Act, where a bill of note is 
required to be protested within a specified time or before some further proceeding is taken it is sufficient 
that  the  bill  has  been  noted  for  protest  before  the  expiration  of  the  specified  time  or  the  taking  of  the 
proceeding; and, the formal protest may be extended at any time thereafter as of the date of the noting.

###CHAPTER X 

###OF REASONABLE TIME 

105. **Reasonable time.**—In determining what is a reasonable time for presentment for acceptance or 
payment, for giving notice of dishonour and for noting, regard shall be had to the nature of the instrument 
and the usual course of dealing with respect to similar instruments; and, in calculating such time, public 
holidays shall be excluded. 

106. **Reasonable time of giving notice of dishonour.**—If the holder and the party to whom notice of 
dishonour is given carry on business or live (as the case may be) in different places, such notice is given 
within a reasonable time if it is dispatched by the next post or on the day next after the day of dishonour. 

  If the said parties carry on business or live in the same place, such notice is given within a reasonable 
time if it is dispatched in time to reach its destination on the day next after the day of dishonour. 

107. **Reasonable  time  for  transmitting  such  notice.**—A party receiving notice of dishonour, who 
seeks  to  enforce  his  right  against  a  prior  party,  transmits  the  notice  within  a  reasonable  time  if  he 
transmits it within the same time after its receipt as he would have had to give notice if he had been the 
holder. 

###CHAPTER XI 

###OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED 

108. **Acceptance for honour.**—When  a  bill  of  exchange  has  been  noted  or  protested  for  non-
acceptance  or  for  better  security,  any  person  not  being  a  party  already  liable  thereon  may,  with  the 
consent of the holder, by writing on the bill, accept the same for the honour of any party thereto. 

109. **How  acceptance for  honour  must  be  made.**—A person desiring to accept for honour must, 
by  writing  on  the  bill  under  his  hand, declare  that  he  accepts  under  protest  the  protested  bill  for  the 
honour of the drawer or of a particular indorser whom he names, or generally for honour.

110. **Acceptance not specifying for whose honour it is made.**—Where  the  acceptance  does  not 
express for whose honour it is made it shall be deemed to be made for the honour of the drawer. 

111. **Liability of acceptor for honour.**—An  acceptor  for  honour  binds  himself  to  all  parties 
subsequent to the party for whose honour he accepts to pay the amount of the bill if the drawee do not; 
and such party and all prior parties are liable in their respective capacities to compensate the acceptor for 
honour for all loss or damage sustained by him in consequence of such acceptance. 

  But an acceptor for honour is not liable to the holder of the bill unless it is presented, or (in case the 
address given by such acceptor on the bill is a place other than the place where the bill is made payable) 
forwarded for presentment, not later than the day next after the day of its maturity. 

112. **When  acceptor  for  honour  may  be  charged.**—An acceptor  for  honour  cannot  be  charged 
unless the bill has at its maturity been presented to the drawee for payment, and has been dishonoured by 
him, and noted or protested for such dishonour. 

113. **Payment for honour.**—When a bill of exchange has been noted or protested for non-payment, 
any person may pay the same for the honour of any party liable to pay the same: provided that the person 
so paying or his agent in that behalf has previously declared before a notary public the party for whose 
honour he pays, and that such declaration has been recorded by such notary public. 

114. **Right of payer for honour.**—Any person so paying is entitled to all the rights in respect of the 
bill, of the holder at the time of such payment, and may recover from the party for whose honour he pays 
all sums so paid, with interest thereon and with all expenses properly incurred in making such payment. 

115. **Drawee in case of need.**—Where a drawee in case of need is named in a bill of exchange, or in 
any indorsement thereon, the bill is not dishonoured until it has been dishonoured by such drawee. 

116. **Acceptance and payment without protest.**—A drawee in case of need may accept and pay the 
bill of exchange without previous protest. 

###CHAPTER XII 

###OF COMPENSATION 

117. **Rules as to compensation.**—The compensation payable in case of dishonour of a promissory 
note,  bill  of  exchange  or  cheque,  by  any  party  liable  to  the  holder  or  any  indorsee,  shall be 
determined by the following rules:— 

  (a) the  holder  is  entitled  to  the  amount  due  upon  the  instrument  together  with  the  expenses 
properly incurred in presenting, noting and protesting it; 

  (b) when the  person  charged  resides at a  place  different from  that  at  which the  instrument  was 
payable, the holder is entitled to receive such sum at the current rate of exchange between the two 
places; 

  (c) an indorser who, being liable, has paid the amount due on the same is entitled to the amount 
so  paid  with interest at eighteen per centum per  annum  from  the  date  of  payment  until  tender  or 
realization thereof, together with all expenses caused by the dishonour and payment; 

  (d) when the person charged and such indorser reside at different places, the indorser is entitled to 
receive such sum at the current rate of exchange between the two places; 

  (e) the party entitled to compensation may draw a bill upon the party liable to compensate him, 
payable  at  sight  or  on  demand,  for  the  amount  due  to  him,  together  with  all  expenses  properly 
incurred  by  him.  Such  bill  must  be  accompanied  by  the  instrument  dishonoured  and  the  protest 
thereof  (if  any).  If  such  bill  is  dishonoured,  the  party  dishonouring  the  same  is  liable  to  make 
compensation thereof in the same manner as in the case of the original bill. 

###CHAPTER XIII 

###SPECIAL RULES OF EVIDENCE 

118. **Presumptions  as  to  negotiable  instruments.**—Until  the  contrary  is  proved,  the  following 
presumptions shall be made:— 

  (a) **of consideration**:—that  every  negotiable  instrument  was  made  or  drawn  for  consideration, 
and that every such instrument, when it has been accepted, indorsed,  negotiated or transferred, was 
accepted, indorsed, negotiated or transferred for consideration; 

  (b) **as to date**:—that every negotiable instrument bearing a date was made or drawn on such date; 

  (c) **as to time of acceptance**:—that  every  accepted  bill  of  exchange  was  accepted  within  a 
reasonable time after its date and before its maturity; 

  (d) **as  to  time  of  transfer**:—that every transfer of a negotiable instrument was made before its 
naturity; 

  (e) **as to order of indorsements**:—that the indorsements appearing upon a negotiable instrument 
were made in the order in which they appear then on; 

  (f) **as to stamp**:— that a lost promissory note, bill of exchange or cheque was duly stamped; 

  (g) **that holder is a holder in due course**:—that the holder of a negotiable instrument is a holder 
in due course: provided that, where the instrutment has been obtained from its lawful owner, or from 
any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the 
maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden 
of proving that the holder is a holder in due course lies upon him. 

119. **Presumption on proof of protest.**—Ina  suit  upon  an  instrument  which  has  been 
dishonoured, the Court shall, on proof of the protest, presume the fact of dishonour, unless and until 
such fact is disproved. 

120. **Estoppel  against  denying  original  validity  of  instrument.**—No maker of a promissory note, 
and no drawer of a bill of exchange or cheque, and no acceptor of a bill of exchange for the honour of the 
drawer  shall,  in  a  suit  thereon  by  a  holder  in  due  course,  be  permitted  to  deny  the  validity  of  the 
instrument as originally made or drawn. 

121. **Estoppel against denying capacity of payee to indorse.**—No maker of a promissory note and 
no acceptor of a bill of exchange payable to order shall, in a suit thereon by a holder in due course, be 
permitted to deny the payee's capacity, at the date of the note or bill, to indorse the same. 

122. **Estoppel against denying signature or capacity of prior party.**—No indorser of a negotiable 
instrument shall, in a suit thereon by a subsequent holder, be permitted to deny the signature or capacity 
to contract of any prior party to the instrument. 

###CHAPTER XIV 

###OF CROSSED CHEQUES 

123. **Cheque crossed generally.**—Where  a  cheque  bears  across  its  face  an  addition  of  the  words 
“and  company”  or  any  abbreviation  thereof,  between  two  parallel  transverse  lines,  or  of  two  parallel 
transverse lines simply, either with or without the words “not negotiable,” that addition shall be deemed a 
crossing, and the cheque shall be deemed to be crossed generally. 

124. **Cheque crossed specially.**—Where a cheque bears across its face an addition of the name of a 
banker, either with or without the words “not negotiable,” that addition shall be deemed a crossing and 
the cheque shall be deemed to be crossed specially, and to be crossed to that banker. 

125. **Crossing after issue.**—Where  a  cheque  is  uncrossed,  the  holder  may  cross  it  generally  or 
specially. 

  Where a cheque is crossed generally, the holder may cross it specially. 

  Where a cheque is crossed generally, or specially, the holder may add the words “not negotiable”. 

  Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to 
another banker, his agent, for collection. 

126. **Payment of cheque crossed generally.**—Where a cheque is crossed generally, the banker on 
whom it is drawn shall not pay it otherwise than to a banker. 

**Payment of cheque crossed specially.**—Where a cheque is crossed specially, the banker on whom it 
is drawn shall not pay it otherwise than to the banker to whom it is crossed, or his agent for collection. 

127. **Payment of cheque crossed specially more than once.**—Where a cheque is crossed specially 
to  more than  one  banker, except  when crossed  to  an  agent for the  purpose  of  collection,  the  banker on 
whom it is drawn shall refuse payment thereof. 

128. **Payment in due course of crossed cheque.**—Where the banker on whom a crossed cheque is 
drawn has paid the same in due course, the banker paying the cheque, and (in case such cheque has come 
to  the  hands  of  the  payee)  the  drawer  thereof,  shall  respectively  be  entitled  to  the  same  rights,  and  be 
placed in the same position in all respects, as they would respectively be entitled to and placed in if the 
amount of the cheque had been paid to and received by the true owner thereof. 

129. **Payment  of  crossed  cheque  out  of  due  course.**—Any  banker  paying  a  cheque  crossed 
generally otherwise than to a banker, or a cheque crossed specially otherwise than to the banker to whom 
the same is crossed, or his agent for collection, being a banker, shall be liable to the true owner of the 
cheque for any loss he may sustain owing to the cheque having been so paid. 

130. **Cheque bearing “not negotiable”.**—A person taking a cheque crossed generally or specially, 
bearing  in  either  case  the  words  “not  negotiable,”  shall  not  have,  and  shall  not  be  capable  of  giving,  a 
better title to the cheque than that which the person from whom he took it had. 

131. **Non-liability of banker receiving payment of cheque.**—A banker who has in good faith and 
without negligence received payment for a customer of a cheque crossed generally or specially to himself 
shall  not,  in  case  the  title  to  the  cheque  proves  defective,  incur  any  liability  to  the  true  owner  of  the 
cheque by reason only of having received such payment. 

*Explanation* (I).—  A  banker  receives  payment  of  a  crossed  cheque  for  a  customer  within  the 
meaning  of  this  section  notwithstanding  that  he  credits  his  customer’s  account  with  the  amount  of  the 
cheque before receiving payment thereof.

*Explanation* II.—It  shall  be  the  duty  of  the  banker  who  receives  payment  based  on  an  electronic 
image  of  a  truncated  cheque  held  with  him,  to  verify  the  prima  facie  genuineness  of  the  cheque  to  be 
truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified 
with due diligence and ordinary care.

131A. **Application of Chapter to drafts.**—The provisions of this Chapter shall apply to any draft, 
as defined in section 85A, as if the draft were a cheque.

###CHAPTER XV 

###O F   B I L L S   I N   S E T S  

132. **Set of bills.**—Bills of exchange may be drawn in parts, each part being numbered and containing 
a provision that it shall continue payable only so long as the others remain unpaid. All the parts together 
make  a  set;  but the  whole  set  constitutes  only  one  bill,  and  is  extinguished  when  one  of  the  parts,  if  a 
separate bill, would be extinguished. 

*Exception.*—When  a  person  accepts  or  indorses  different  parts  of  the  bill  in  favour  of  different 
persons, he and the subsequent endorsers of each part are liable on such part as if it were a separate bill. 

133. **Holder of first acquired part entitled to all**—As between holders in due course of different parts 
of the same set, he who first acquired title to his part is entitled to the other parts and the money represented 
by the bill. 

###CHAPTER XVI 

###O F    I N T E R N A T I O N A L   LA W 

134. **Law governing liability of maker, acceptor or indorser of foreign instrument.**—In the absence 
of  a  contract  to  the  contrary,  the  liability  of  the  maker  or  drawer  of  a  foreign  promissory  note,  bill  of 
exchange or cheque is regulated in all essential matters by the law of the place where he made the instrument, 
and the respective liabilities of the acceptor and indorser by the law of the place where the instrument is made 
payable. 

*Illustration*

  A bill of exchange was drawn by A in California, where the rate of interest is 25 per cent., and accepted by B, payable in 
Washington, where the rate of interest is 6 per cent. The bill is erdorsed in India, and is dishonoured. An action on the bill is 
brought against B in India. He is liable to pay interest at the rate of 6 per cent. only; but if A is charged as drawer, A is liable to 
pay interest at the rate of 25 per cent. 

135. **Law of place of payment governs dishonour.**—Where a promissory note, bill of exchange or 
cheque is made payable in a different place from that in which it is made or indorsed, the law of the place 
where  it  is  made  payable  determines  what  constitutes  dishonour  and  what  notice  of  dishonour  is 
sufficient. 

*Illustration*

  A bill of exchange drawn and indorsed in India, but accepted payable in France, is dishonoured. The indorsee causes it to 
be protested for such dishonour, and gives notice thereof in accordance with the law of France, though not in accordance with the 
rules herein contained in respect of bills which are not foreign. The notice is sufficient. 

136. **Instrument  made,  etc.,  out  of  India,  but  in  accordance  with  the  law  of  India.**—If  a 
negotiable instrument is made, drawn, accepted or indorsed outside India, but in accordance with the 
law of India, the circumstances that any agreement evidenced by such instrument is invalid according 
to the law of the country wherein it was entered into does not invalidate any subsequent acceptance or 
indorsement made thereon within India. 

137. **Presumption  as  to  foreign  law.**—The  law  of  any  foreign  country regarding  promissory 
notes, bills of exchange and cheques shall be presumed to be the same as that of India, unless and until 
the contrary is proved. 

###CHAPTER XVII 

###OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS 

138. **Dishonour  of  cheque  for  insufficiency,  etc.,  of  funds  in  the  account.**—Where  any  cheque 
drawn by a person on an account maintained by him with a banker for payment of any amount of money 
to  another  person  from  out  of  that  account  for  the  discharge,  in  whole  or  in  part,  of  any  debt  or  other 
liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of 
that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from 
that account by an agreement made  with that bank, such person shall be deemed to have committed an 
offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for 
a term which may be extended to two years’, or with fine which may extend to twice the amount of the 
cheque, or with both: 

  Provided that nothing contained in this section shall apply unless— 

     (a) the cheque  has  been  presented  to  the  bank  within  a  period  of  six  months  from  the  date  on 
which it is drawn or within the period of its validity, whichever is earlier; 

     (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for 
the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, 
within thirty days of the  receipt of information by him from the bank regarding the return of the 
cheque as unpaid; and 

     (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee 
or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of 
the said notice. 

*Explanation.*—For the purposes of this section, “debt of other liability” means a legally enforceable debt 
or other liability. 

139. **Presumption in favour of holder.**—It shall be presumed, unless the contrary is proved, that the 
holder of a cheque received the cheque of the nature referred to in section138 for the discharge, in whole 
or in part, of any debt or other liability. 

140. **Defence which may not be allowed in any prosecution under section 138.**—Itshall not be a 
defence in a prosecution for an offence under section 138 that the drawer had no reason to believe when 
he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that 
section. 

141. **Offences by companies.**—(1)  If  the  person  committing  an  offence  under  section  138  is  a 
company,  every  person  who,  at  the  time  the  offence  was  committed,  was  in  charge  of,  and  was 
responsible to, the company for the conduct of the business of the company, as well as the company, shall 
be  deemed  to  be  guilty  of  the  offence  and  shall  be  liable  to  be  proceeded  against  and  punished 
accordingly: 

  Provided that nothing contained in this sub-section shall render any person liable to punishment if he 
proves that the offence was committed without his knowledge, or that he had exercised all due diligence 
to prevent the commission of such offence: 

  Provided  further  that  where  a  person  is  nominated  as  a  Director  of  a  company  by  virtue  of  his 
holding  any  office  or  employment  in  the  Central  Government  or  State  Government  or  a  financial 
corporation owned or controlled by the Central Government or the State Government, as the case may be, 
he shall not be liable for prosecution under this Chapter.

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been 
committed  by  a  company  and  it  is  proved  that  the  offence  has  been  committed  with  the  consent  or 
connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other 
officer  of  the  company,  such  director,  manager,  secretary  or  other  officer  shall  also  be  deemed  to  be 
guilty of that offence and shall be liable to be proceeded against and punished accordingly. 

*Explanation.*—For the purposes of this section, — 

  (a) “company” means any body corporate and includes a firm or other association of 
individuals; and 

  (b) “director”, in relation to a firm, means a partner in the firm. 

142. **Cognizance of offences.**— (1) Notwithstanding  anything  contained in  the  Code  of  Criminal 
Procedure, 1973 (2 of 1974),— 

  (a) no  court  shall  take  cognizance  of  any  offence  punishable  under  section  138  except  upon  a 
complaint,  in  writing,  made  by  the  payee  or,  as  the  case  may  be,  the  holder  in  due  course  of  the 
cheque; 

  (b) such  complaint  is  made  within  one  month  of  the  date  on  which  the  cause  of  action  arises 
under clause (c) of the proviso to section 138: 

Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, 
if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such 
period;

  (c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class 
shall try any offence punishable under section 138..

(2) The offence under section 138 shall be inquired into and tried only by a court within whose local 
jurisdiction,— 

  (a) if the cheque is delivered for collection through an account, the branch of the bank where the 
payee or holder in due course, as the case may be, maintains the account, is situated; or 

  (b) if the cheque is presented for payment by the payee or holder in due course, otherwise through 
an account, the branch of the drawee bank where the drawer maintains the account, is situated. 

*Explanation.*—For  the  purposes  of  clause  (a),  where  a  cheque  is  delivered  for  collection  at  any 
branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been 
delivered  to  the  branch  of  the  bank  in  which  the  payee  or  holder  in  due  course,  as  the  case  may  be, 
maintains the account.

142A. **Validation for transfer of pending cases.**—(1) Notwithstanding anything contained in the 
Code of Criminal Procedure, 1973 (2 of 1974) or any judgment, decree, order or direction of any court, 
all cases transferred to the court having jurisdiction under sub-section (2) of section 142, as amended by 
the  Negotiable  Instruments  (Amendment)  Ordinance,  2015  (Ord.  6  of  2015),  shall  be  deemed  to  have 
been transferred under this Act, as if that sub-section had been in force at all material times. 

(2) Notwithstanding anything contained in sub-section (2) of section 142 or sub-section (1), where the 
payee or the holder in due course, as the case may be, has filed a complaint against the drawer of a cheque 
in the court having jurisdiction under sub-section (2) of section 142 or the case has been transferred to 
that  court  under sub-section  (1)  and  such  complaint is  pending  in  that  court,  all  subsequent  complaints 
arising  out  of  section  138  against  the  same  drawer  shall  be  filed  before  the  same  court  irrespective  of 
whether  those  cheques  were  delivered  for  collection  or  presented  for  payment  within  the  territorial 
jurisdiction of that court. 

(3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Act, 2015 (26 
of 2015), more than one prosecution filed by the same payee or holder in due course, as the case may be, 
against  the  same  drawer  of  cheques  is  pending  before  different  courts,  upon  the  said  fact  having  been 
brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under 
sub-section (2) of section 142, as amended by the Negotiable Instruments (Amendment) Ordinance, 2015 
(Ord. 6 of 2015), before which the first case was filed and is pending, as if that sub-section had been in 
force at all material times.

143. **Power  of  Court  to  try  cases  summarily.**—(1) Notwithstanding  anything  contained  in  the 
Code of Criminal Procedure, 1973 (2 of 1974) all offences under this Chapter shall be tried by a Judicial 
Magistrate  of  the  first  class  or  by  a  Metropolitan  Magistrate  and  the  provisions  of  sections  262  to  265 
(both inclusive) of the said Code shall, as far as may be, apply to such trials: 

  Provided that in the case of any conviction in a summary trial under this section, it shall be lawful for 
the Magistrate to pass a sentence of imprisonment for a term not exceeding one year and an amount of 
fine exceeding five thousand rupees: 

  Provided further that when at the commencement of, or in the course of, a summary trial under this 
section, it appears to the Magistrate that the nature of the case is such that a sentence of imprisonment for 
a term exceeding one year may have to be passed or that it is, for any other reason, undesirable to try the 
case  summarily,  the  Magistrate  shall  after  hearing  the  parties,  record  an  order  to  that  effect  and 
thereafter recall any witness who may have been examined and proceed to hear or rehear the case in the 
manner provided by the said Code. 

(2) The trial of a case under this section shall, so far as practicable, consistently with the interests of 
justice, be continued from day to day until its conclusion, unless the Court finds the adjournment of the 
trial beyond the following day to be necessary for reasons to be recorded in writing. 

(3) Every trial under this section shall be conducted as expeditiously as possible and an endeavour 
shall be made to conclude the trial within six months from the date of filing of the complaint. 

143A. **Power to direct interim compensation.**—(1)  Notwithstanding  anything  contained  in  the 
Code of Criminal Procedure, 1973, the Court trying an offence under section 138 may order the drawer of 
the cheque to pay interim compensation to the complainant— 

  (a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the 
complaint; and 

  (b) in any other case, upon framing of charge. 

(2) The interim compensation under sub-section (1) shall not exceed twenty per cent. of the amount 
of the cheque. 

(3) The interim compensation shall be paid within sixty days from the date of the order under sub-
section (1), or within such further period not exceeding thirty days as may be directed by the Court on 
sufficient cause being shown by the drawer of the cheque. 

(4) If  the  drawer  of  the  cheque  is  acquitted,  the  Court  shall  direct  the  complainant  to  repay  to  the 
drawer  the  amount  of  interim  compensation,  with interest  at the  bank  rate  as published by  the  Reserve 
Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of 
the  order,  or  within  such  further  period  not  exceeding  thirty  days  as  may  be  directed  by  the  Court  on 
sufficient cause being shown by the complainant. 

(5) The interim compensation payable under this section may be recovered as if it were a fine under 
section 421 of the Code of Criminal Procedure, 1973 (2 of 1974). 

(6) The  amount  of  fine  imposed  under  section  138  or  the  amount  of  compensation  awarded  under 
section 357 of the Code of Criminal Procedure, 1973 (2 of 1974), shall be reduced by the amount paid or 
recovered as interim compensation under this section.

144. **Mode of  service  of  summons.**—(1)  Notwithstanding  anything  contained  in  the  Code  of 
Criminal  Procedure,  1973  (2  of  1974)  and  for  the  purposes  of  this  Chapter,  a  Magistrate  issuing  a 
summons to an accused or a witness may direct a copy of summons to be served at the place where such 
accused or witness ordinarily resides or carries on business or personally works for gain, by speed post or 
by such courier services as are approved by a Court of Session. 

(2) Where  an  acknowledgment  purporting  to  be  signed  by  the  accused  or  the  witness  or  an 
endorsement purported to be made by any person authorised by the postal department or the courier services 
that the accused or the witness refused to take delivery of summons has been received, the Court issuing 
the summons may declare that the summons has been duly served. 

145. **Evidence on affidavit.**—(1)Notwithstanding  anything  contained  in  the  Code  of  Criminal 
Procedure, 1973 (2 of 1974), the evidence of the complainant may be given by him on affidavit and may, 
subject to all just exceptions be read in evidence in any enquiry, trial or other proceeding under the said 
Code. 

(2) The  Court  may,  if  it  thinks  fit,  and  shall,  on  the  application  of  the  prosecution  or  the  accused, 
summon and examine any person giving evidence on affidavit as to the facts contained therein. 

146. **Bank’s  slip  prima  facie  evidence  of  certain  facts.**—The  Court  shall,  in  respect  of  every 
proceeding  under  this  Chapter,  on  production  of  Bank's  slip  or  memo  having  thereon the  official  mark 
denoting that the cheque has been dishonoured, presume the fact of dishonour of such cheque, unless and 
until such fact is disproved. 

147. **Offences to be compoundable.**—Notwithstanding anything contained in the Code of Criminal 
Procedure, 1973 (2 of 1974),every offence punishable under this Act shall be compoundable. 

148. Power  of  Appellate  Court  to  order  payment  pending  appeal  against  conviction.—(1) 
Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), in an appeal by 
the drawer against conviction under section 138, the Appellate Court may order the appellant to deposit 
such sum which shall be a minimum of twenty per cent. of the fine or compensation awarded by the trial 
Court: 

  Provided  that  the  amount  payable  under  this  sub-section  shall  be  in  addition  to  any  interim 
compensation paid by the appellant under section 143A. 

(2) The amount referred to in sub-section (1) shall be deposited within sixty days from the date of the 
order,  or  within  such  further  period  not  exceeding  thirty  days  as  may  be  directed  by  the  Court  on 
sufficient cause being shown by the appellant. 

(3)  The  Appellate  Court  may  direct  the  release  of  the  amount  deposited  by  the  appellant  to  the 
complainant at any time during the pendency of the appeal: 

  Provided  that  if  the  appellant  is  acquitted,  the  Court  shall  direct  the  complainant  to  repay  to  the 
appellant the amount so released, with interest at the bank rate as published by the Reserve Bank of India, 
prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or 
within such further period not exceeding thirty days as may be directed by the Court on sufficient cause 
being shown by the complainant.

 
 
SCHEDULE.—*[Enactments  repealed].—Rep.  by the  Repealing  and  Amending  Act,*  1891 
(12 of 1891),  s. 2 *and Schedule I.*